The Tory party was today plunged into another sleaze crisis as a senior MP quit over a cash for questions scandal.

Patrick Mercer stepped down and declared he would not be standing at the next election after he was caught allegedly agreeing to lobby on behalf of a fake company working for the military dictatorship in Fiji.

It was claimed the former Army major was paid £4,000 but failed to declare £2,000 of the money – breaching anti-sleaze laws.

The dramatic sting exposes David Cameron’s pledge to clean up ­Westminster in the wake of the expenses scandal as a myth.

It is understood 57-year-old Mr Mercer ­eventually declared the money on Tuesday, although nothing was on his register of interests last night.

Pictures have emerged of him signing a contract with the fake ­lobbyists, in which he declares: “Let’s sign this, with pleasure.”

Mr Mercer could now face a police probe over the allegations under the Bribery Act. He has also referred himself to Parliament’s sleaze watchdog.

Resigned: Newark MP Patrick Mercer has quit the Tories (Image: PA)

He is thought to be just the first of a number of MPs and lords caught in an investigation by the Daily Telegraph and BBC’s Panorama.

A made-up firm, tonight named as Alistair Andrews ­Communications, allegedly approached the Tory offering cash to set up a Parliamentary group on Fiji and ask a number of questions in Parliament on behalf of the island nation – banned from the ­Commonwealth in 2009 amid criticism of its human rights record and severe lack of democracy.

The MP for Newark, Nottinghamshire, said he agreed to be a consultant for work carried out outside parliament.

But ­Parliamentary records show Mr Mercer has asked five questions this month about Fiji’s suspension from the Commonwealth, and UK ­investment in its public ­transport – without declaring an interest.

In March he also put down an Early Day Motion - a parliamentary device used to draw attention to issues - insisting there was “no ­justification for Fiji’s continued suspension”.

Mr Mercer today released a ­statement revealing he was taking legal advice.

He said: “Panorama are ­planning to broadcast a programme alleging that I have broken ­Parliamentary rules.

“I have referred myself to the ­Parliamentary Commissioner for Standards.

"In the meantime, to save my party embarrassment, I have resigned the Conservative Whip and have so informed (chief whip) Sir George Young.

"I have also decided not to stand at the next general election.”

Mr Mercer is expected to claim he was entrapped and did not break Parliamentary rules.

Islands: Fiji in the Pacific Ocean (Image: Getty)

A Tory spokesman said Mr Cameron thought his former colleague had “done the right thing” by quitting.

He added: “It’s important that the due processes take their course.”

Mr Mercer is also accused of making a racist remark in undercover footage. He denies the allegation and has vowed to fight it.

The former MP had to step down once before, in 2007 when he was shadow homeland ­security minister.

He had suggested racism was “part and parcel” of life in the forces.

Downing Street will be desperate to avoid a by-election in Newark – where Nigel Farage’s UKIP could pose a threat despite the 16,000 majority secured in 2010.

But pressure was growing tonight for Mr Mercer to leave the Commons immediately - amid further ­revelations expected tomorrow ahead of Panaroma’s expected broadcast on Monday.

Tory backbencher Zac ­Goldsmith said the case highlighted the need for voters to get powers to force by-elections, a change promised by the coalition but stalled.

He tweeted: “If it’s bad enough for you to resign from your party, how can it be OK to continue representing your constituents at all?

"Where’s that Recall?”

A BBC spokesman said: “Panorama has been ­investigating lobbying and the conduct of MPs and the House of Lords.

“The programme is still being made and will be broadcast as soon as possible. The ­investigation raised a number of issues related to those involved.

“Panorama has sought responses from a number of people including Mr Mercer.”

Last year, the MP avoided a probe by standards authorities over separate claims he broke Commons rules.

He was accused of breaking the code of conduct by sponsoring a ­parliamentary pass for the head of a firm that was paying him.

Today’s revelations are certain to reopen calls for a register of lobbyists. The plan was called for by Mr Cameron but has been shelved.

Just last week, Deputy PM Nick Clegg appeared to blame Tory opposition for the register being dropped.

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Cameroons will welcome his downfall

As an arch critic of David Cameron, Patrick Mercer quitting was met with barely concealed joy by allies of the Prime Minister yesterday.

At the prospect of a by-election being called in his Nottinghamshire constituency, one pro-Cameron MP allegedly texted journalists: “Newark: Conservative GAIN.”

Former Army major Mr Mercer outraged Number 10 in 2011 after being caught calling the Prime Minister “a despicable creature”.

The dad of one, who lives in Nottinghamshire with wife Cait, said: “Cameron was an a***. That’s a matter of fact, not politics.”

Mr Mercer also called the Prime Minister “the worst politician in British history since William Gladstone”, said he wished Mr Cameron had never been born and added: “I would take a beggar off the streets... rather than have Cameron.”

The former Sherwood Foresters colonel served in Northern Ireland and was commended for gallantry in 1990.

But he courted controversy in March 2007 when he was sacked from the Tory front bench after he suggested in an interview being called a “black b******” was a normal part of armed forces life.

He also allegedly said he had met a lot of “idle and useless” ethnic minority soldiers.

Fiji factbox

Fiji, with a population of nearly 850,000, is one of the more developed economies in the Pacific island region, exporting sugar and with a thriving tourism industry.

But since being granted independence from the UK in 1970, there have been four coups.

The military, led by Commodore Frank Bainimarama, has since 1987 either ruled directly or influenced governments.

In September 2009, Fiji was suspended from the Commonwealth for failing to hold elections.